Organizational Wellness

The Golden Circle Theory: What’s Your Business’s Why?

Last Updated Nov 8, 2024

Time to read: 9 minutes

Did you know that the average person is exposed to anywhere from 4,000 to 10,000 ads a day? With the noise of social media and the internet, simply advertising your incredible service or product may not be enough to draw in customers. Companies today have to figure out how to stand out from the crowd by connecting with their customers in meaningful ways.

For many organizations, the Golden Circle Theory is that secret ingredient. First introduced by leadership expert Simon Sinek in his famous TED Talk, “How Great Leaders Inspire Action,” this framework explains why some companies and leaders make lasting impressions while others fade into the background. This theory isn’t just about what your company does—it’s about why it does it.

HR leaders can have a major impact on how your company applies this theory to its strategies. Discover how you can leverage this concept to improve leadership development strategies and business operations for your organization!

What Is the Golden Circle Theory?

The Golden Circle Theory suggests that successful leaders and organizations communicate from the inside out by starting with the “Why.” The “Why” is the core purpose of the organization and is the innermost part of the circle. Next comes the “How,” representing an organization’s unique approach, followed by the outermost layer, the “What,” which is the products or services offered.

The “What”

The tangible services or products that a business offers help define its “What.” The “What” is the most visible and easily articulated aspect of the Golden Circle Theory — customers can see, touch, or personally experience these offerings. Because it’s so literal, the “What” is often readily understood by companies. This makes it easy for the “What” to become the foundation of an organization’s development.

Take Apple for example. Their “What” is their iconic products such as the iPhone, MacBook, and iPad. They are instantly recognizable and make Apple one of the biggest leaders in the technology sector. You can also consider Tesla — their “What” are electric vehicles, which are known for their innovation and sustainability. For both companies, these products embody their operations.

The question is, are these products the primary source behind Apple’s achievements? According to the Golden Circle Theory, the products are essential but not enough to lead to sustained success. The “What” helps define a business’ market presence, but to truly stand out and connect with customers on a deeper level, the “How” and especially the “Why” are even more important.

The “How”

The middle circle of the Golden Circle is dedicated to the "How" of businesses, representing the unique processes, approaches, or values that set them apart in the marketplace. While the "What" defines the products or services, the "How" defines the distinctive way in which a company delivers or executes them.

Many companies rely on their “How” to differentiate themselves, making their operations a cornerstone of their business model. For instance, McDonald's is known for its efficient and standardized processes, especially for creating a consistent customer experience worldwide. This sets it apart in the fast food industry. Similarly, Toyota’s “How” is rooted in its renowned production system that emphasizes quality. This makes the company more competitive in the automotive manufacturing industry and attracts more customers.

By honing the “How” of the company, organizations can emphasize their unique value propositions outside of just their products. McDonald's may have enjoyable food, but people often choose them because they can provide their product so quickly. For many companies, their competitive edge comes from innovating their standard operating procedures to be more interesting or helpful. However, the Golden Circle Theory suggests that to resonate with customers and build lasting loyalty, leaders must go beyond the "How" and explore the foundational "Why."

The “Why”

The innermost circle of the Golden Circle, the “Why,” represents an organization’s core purpose, values, and beliefs. These elements drive a company’s purpose beyond profit — the “Why” is the driving force that inspires and motivates the organization. Understanding this deeper purpose is what serves as the compass as companies make decisions and take action.

This concept is key to the Golden Circle Theory because it suggests that starting with and prioritizing the “Why” is how organizations can authentically and impactfully communicate. In fact, understanding the deeper purpose of your company resonates with customers, but often inspires employees, too. In this respect, the “Why” is most important because it so directly shapes the “How” and the “What.”

The “Why” for Tesla goes beyond producing electric vehicles — Tesla’s core purpose is to create a sustainable future by accelerating the world's transition to clean energy. This vision shapes their values and business decisions, as well as their internal processes.

Why the “Why” Matters

Sinek asks leaders the question: “What is your why?” for a reason. Of course, no business is complete without its products, services, and operations — or the “What” and “How.” However, the Golden Circle Theory argues that not only does the “Why” matter, too, but that it matters the most. These benefits often improve companies and the way they build their brand.

Enhances Employee Engagement and Motivation

A clear "Why" serves as a powerful motivator for employees, instilling a sense of purpose and pride in their work. When employees understand the deeper mission of the company, beyond financial goals, they feel a connection to something meaningful. This connection fosters a sense of belonging and engagement as employees understand the value of their contributions.

Purpose-driven companies experienced 40% higher levels of workforce retention compared to their competitors, according to the Deloitte Insights 2020 Global Marketing Trends Report. This really shows the impact an effective "Why" can have on employee commitment and loyalty.

Builds a Stronger Brand Identity

Crafting a clear "Why" is also a big way that companies shape their brand identity. A purpose-driven narrative adds authenticity and relatability to a brand, which resonates with and intrigues consumers.

Authenticity is one of the most important elements for building trust. As companies communicate their values and beliefs, customers are more likely to connect emotionally with the brand. Instead of only focusing on transactions, brands with a strong “Why” can create a lasting impression in their industry and consumer base. A solid “Why” also helps your company keep brand messaging consistent — this makes you more memorable and reliable in the eyes of your consumers.

Creates Long-Term Customer Loyalty

Customers are drawn to companies with a compelling "Why" because it goes beyond the features of a product or service. A well-defined purpose usually speaks to consumers who share similar values, which creates a sense of alignment.

Having an emotional connection helps businesses stand out from the competition. Plus, when businesses exemplify their values, especially through factors like ethical consumption or organizational culture, customers are often more loyal to the brand. Essentially, when individuals believe in a company's mission and values, they are more likely to become repeat customers and advocates. The enduring loyalty stems from the trust formed through a shared sense of purpose.

How to Apply the Golden Circle Theory to Your Business

Identify Your “Why”

A great place to start is by asking key questions about your business and why your company does what it does. What values drive your decisions? Consider reflecting on the impact you aim to make — it can help to engage with stakeholders and employees to gather diverse perspectives. You can ask questions like:

Why do we do what we do?
Why should people care about what we do?
Why do we do this over anything else?

Then, analyze the common threads that emerge. A powerful and relevant "Why" is a concise statement that captures the essence of your business's purpose. It also goes beyond making money, which Sinek considers a result of your deeper motivations. This process lays the foundation for a purpose-driven approach and informs aspects like your corporate culture and marketing strategy.

Aligning Your “Why” with Your “How”

Next, it’s important that your “Why” is woven into your “How” as you evaluate your business processes and practices. It's about translating purpose into action. Often, implementing the “Why” requires a comprehensive review of internal operations.

You can start on the internal side by evaluating employee workflows and decision-making processes. How are your core values integrated into the fabric of your organization? Some companies focus on encouraging innovation from the workforce so that teams and their efforts reflect your “Why." This alignment not only reinforces your commitment but also fosters a consistent and authentic organizational culture.

It’s also worth evaluating how your organization’s “How” factors set you apart from the competition. What about your values or strengths makes you more appealing to consumers or better equipped for the market? The “Why” of your organization informs current and future product development. It can even inform your organizational structure and the roles within your workforce. Some companies find that their current operations are not conducive to their overall mission and purpose and decide to change their approach.

Communicating Your “What” Through the Lens of “Why”

Once you establish what your organization aims to do and how you will implement your goals, you can look for innovative ways to share your vision. For many organizations, this starts with creating a narrative that weaves your products and services into the broader context of your mission.

For example, your marketing messages don’t just need to describe what you sell, but why what you sell matters. You can share stories that illustrate the impact your business seeks to make. Not to mention, all kinds of communication channels can help you reach your target audience, such as social media and digital branding materials. Companies that can effectively talk to their audiences and share their “Why” can often make their “What” far more compelling.

Examples of the Golden Circle Theory in Action

Apple is a strong example of how the Golden Circle Theory can propel a company forward. Sinek uses their Golden Circle to make his main points:

Why: Apple's core purpose is to challenge the status quo and think differently. They aim to provide user-friendly products that enhance people's lives.
How: Innovation and design excellence are at the heart of Apple's operational strategy. Their emphasis on a user-friendly design and cutting-edge technology distinguishes them in the market.
What: They make high-quality computers.

While their technology is their main offering, the heart of their business isn’t computers — it’s to think differently and innovate. These organizational values have attracted both talented employees and a loyal customer base to their company. These customers are not just willing to pay for Apple products, but Apple’s unique vision, which makes their products more trusted and attractive.

Purpose Fuels Customer and Employee Wellbeing

Companies that understand their "Why" stand out from competitors, with both customers and employees. The Golden Circle Theory is a powerful framework that shapes not only products and services but also leadership and employer branding. As companies evaluate their purpose and how that purpose impacts their organization, employee wellness is often a key part of the conversation.

One way to help employees connect with their work and boost job satisfaction is with an employee wellness program. The numbers agree — 88% of HR leaders report that their wellbeing program is ‘extremely’ or ‘very’ important to employee satisfaction.

By providing employees with benefits and resources for their health with a program like Wellhub, your workforce can be all the more engaged and purpose-driven. Speak with a Wellbeing Specialist today to explore how employee wellness can transform your organization from the inside out.